A big push to take banks to the rural poor

Financial inclusion has been one of the major programmes of the UPA government. The finance ministry has given a clear diktat to its banks - expand branch network in rural areas.

The Indian Banks' Association (IBA) is already working out a strategy to facilitate branchless banking in villages. Remote villages with a population of just 2000 could get micro-automatic teller machines (ATM) for banking transactions.

As the government prepares to roll out the direct cash transfer scheme, public sector banks have been asked to focus on expansion of branch network to bring all rural households under the banking net without which the centre's efforts would have limited results.

This push by the government has been necessitated due to the poor banking penetration in the countryl According to finance ministry data, the country has 24,66,92,667 households in total, of which only 58.7% are covered under the banking net.

The statistics are worrying, especially in Tamil Nadu, Gujarat, Madhya Pradesh, Andhra Pradesh and Jharkhand, where more than 40% the households still do not have a bank account.

In the eastern and north eastern states such as Manipur, Assam, Bihar, Madhya Pradesh, Orissa, West Bengal and Meghalaya, it gets worse. More than 50% of the households are outside the banking net.

Policy decisions have been made to improve these numbers. According to the draft guidelines on new banking licenses put up by the RBI, all new banks would have to open at least 25% of their branches in unbanked rural centres. This move alone with benefit millions of Indians.

In the current fiscal, about 70 lakh new no frill accounts have been added to cover the unbanked population. The government has directed banks to cover at least one household by 2014. Besides, the government has also directed regional rural banks to expand the financial inclusion programme .

"We have been focusing on expanding our rural branch network and we are on track with our targets," TM Bhasin, chairman and managing director, Indian Bank, told Hindustan Times.

Speaking recently at a Ficci event, Prime Minister Manmohan Singh said that to ensure that growth is shared by every Indian, it was crucial to carry out and expand the scope of financial inclusion.